Police in the Australian state of Tasmania on Thursday said several children had fallen from a height of about 10 meters (about 33 feet), and that four of the youngsters had died.
Several other children were critically injured after strong wind lifted the inflatable jumping castle at an elementary school's end-of-year party.
Police said the pupils had been celebrating the last week of classes before the Christmas break when the incident occurred.
"I can now sadly confirm that four children have died and four are in a critical condition and one in a serious condition," Tasmanian police commissioner Darren Hine said.
The victims were two boys and two girls, aged around 11 years old.
'Confronting and distressing'
Footage from local media showed blue tarpaulin sheets shielding what police said was "a very confronting and distressing scene."
Multiple ambulances and several helicopters were scrambled to the scene near the state's third-largest town Devonport, in the northwest of the island.
Australian Prime Minister Scott Morrison said the incident was "just shattering" and "unthinkably heartbreaking."
"Young children on a fun day out, together with their families and it turns to such horrific tragedy, at this time of year, it just breaks your heart," he said.